Dollar moves on speculation of Trump-Xi Meeting to be held in Beijing Soon

Daily Update - 13th February 2019

Yesterday's Focus

• USD Fed's Chair Powell speech
• GBP Theresa May statement

Yesterday's Explained

Federal Reserve Chairman Jerome Powell said the U.S. economy looks strong, but the central bank is continuing to find ways to fight poverty. Speaking on Tuesday in Mississippi, Powell said the central bank is looking at a number of ways to help rural communities, with a particular focus on banking and finance for areas of need. Powell pledged that the Fed is committed to programs like the Community Reinvestment Act that are aimed at getting development funds to areas in need. He also cited the importance of equal education opportunities and workforce training.

Sterling pound rose off three-week lows against the dollar on Tuesday as Prime Minister Theresa May said the government would seek to speed up ratification of its Brexit withdrawal deal with the European Union if time gets too tight. Time is running out for May to persuade the EU to amend the Brexit deal and then get British lawmakers to approve it, before Britain is scheduled to leave the bloc on March 29.

 

Today's Focus

• GBP UK CPI
• US CPI data

Today's Market

The UK Consumer Price Index (CPI) for January will be published today and is forecast to show a modest decline. The Bank of England (BoE) has a 2.0% inflation target, and expectations suggest this will be delivered, down from 3.0% a year ago. Given the uncertainty over Brexit, this figure is unlikely to carry its usual weighting, and it could be difficult to see how it might impact monetary policy in the short-term. However, wages are rising, so any undershoot could be an indication that consumers are holding back from some spending decisions. 

The US Consumer Price Index for January is also expected, and after last month’s print of 1.9%, forecasts are that the reading will hold steady at best. The lengthy US government shutdown could add some downside pressure, but the peaks of inflation over the last two years are again showing themselves to be the result of unsustainable tax breaks. The Federal Reserve has already sent a dovish signal to the market over the interest rate outlook, but if inflation does fall further and it can’t be explained away by the government shutdown, then further stimulus may be required.